J&J Forecasts Increased Biosimilar Competition for 2019

In its year-end financial report, Johnson & Johnson(J&J) predicted product sales for 2019 to range from $80.4 billion to $81.2 billion, about $1 to $2 billion below what Wall Street analysts projected. The company thinks this will largely be due to increased biosimilar competition for its Remicade (infliximab) for inflammatory diseases, and for generic competition to its Zytiga (abiraterone acetate), a prostate cancer drug.

Average analysts estimates for the 2019 sales, according to IBES data from Refinitiv, was $82.69 billion.

For the fourth quarter, J&J sales rose to $20.39 billion, or about 1 percent, which beat out Wall Street’s average estimate of $20.20 billion. Sales were assisted by Stelara sales for Crohn’s disease, which were up 29 percent to $4.15 billion. J&J’s Tremfya (guselkumab) for psoriasis also added $544 million for the year.

Remicade sales were down about $1 billion compared to 2017, largely due to biosimilar competition, but even more so due to discounting. J&J still has 93 percent of the U.S. market for this indication.

Consumer sales of baby care products, including baby powder, washes and lotions, dropped to $439 million from $490 million in the fourth quarter of 2017. J&J relaunched the line with new products in the summer of 2018 hoping to boost sales. It’s possible that the market is being hit by all the news of lawsuits and asbestos contamination.

The company’s litigation expenses doubled in the fourth quarter because of the baby powder litigation. J&J has reserved $1.29 billion for legal costs during the quarter alone, double the $645 million it spent in the fourth quarter in 2017. For the entire year, litigation expenses totaled $1.99 billion, a 59 percent increase from 2017.

There have been a number of significant trial losses from the talc-asbestos litigation. In May 2018, a Los Angeles jury sided with 68-year-old Joanne Anderson, who was diagnosed with mesothelioma allegedly linked to J&J’s talc product. The jury awarded Anderson compensatory damages of $21.7 million, with J&J being responsible for 67 percent of the award. The company is fending off approximately 9,000 to 10,000 lawsuits claiming that its baby powder causes ovarian cancer because of asbestos contamination.

J&J’s chief executive officer, Alex Gorsky, said at the analyst conference that pricing is likely to be a big issue for the sector this year. He also said he was concerned about the U.S. federal government’s plans for reference pricing, saying it could have “unintended consequences around access and innovation.” He went on to say J&J is “obviously engaged with the (Trump) administration and a lot of different groups right now on the issue of pharmaceutical pricing.”

Gorsky also argued that medicines and medical devices together account for about 20 percent of costs to patients, with the remaining 80 percent coming “from outside our industry.”

During the call, the company indicated that net prices of its drugs dropped 6 to 8 percent in 2018, after dropping 4.6 percent in 2017. The company raised U.S. list prices on about two dozen prescription drugs earlier this month.

In the conference, Chris DelOrefice, vice president of Investor Relations, said, “As we enter 2019, we are confident in the strength of our business. We believe our Pharmaceutical business will deliver growth while absorbing significant impacts from biosimilar and generic competition. We expect Consumer to maintain above-market growth, and we anticipate our Medical Devices segment will continue to improve. We plan to deliver innovation that will have an enduring impact on patients, caregivers and consumers while also delivering solid financial performance.”